Nonfarm payrolls came in at 214,000 on Friday, falling short of expectations of 231,000. Gold quickly rose about $12 on the news, clawing back up from recent four-year lows. Despite the damper, this marks the ninth consecutive month that nonfarm payrolls have grown by at least 200,000, driving the official unemployment numbers down to just 5.8%. At the same time, however, the labor participation rate remains at 62.8%, which is near 36-year lows for the U.S. labor force. The payrolls report could always be revised up or down, of course, as 8,000 additional jobs were retroactively added to September's numbers to bring them to 256,000.
Precious metals made a slight recovery from this week's lows across the board on Friday morning. After seeing an odd 10-second time out on Comex this morning, silver was about 25 cents, but still well below $16. Gold was trending above $1,155 while the platinum group metals were also comfortably in the green. The DXY dollar spot index fell about 0.4% this morning after closing above 88.1 on Thursday, while the yield on 10-year Treasuries rose 4 basis points to 2.38%.
Yesterday in the Markets
Thursday's closing prices:
Economic News Affecting Gold
Energy stocks are down due to the weakness in crude oil, which is dragging down the entire tech sector with it, as earnings for tech firms have been disappointing as of late. Yet, the Dow Jones and the S&P 500 each enjoyed record-highs at Thursday's close as the stock market remains hot.
In line with this wave of bullish sentiment is the announcement that the London gold fix will now be administered by the ICE (Intercontinental Exchange, Inc.) Benchmark Administration, based in the United States. Through its subsidiary IBA, the new benchmark will take over for the LBMA (London Bullion Market Association) in the first quarter of next year, replacing a pricing system that was developed over 100 years ago. Additionally, a new pricing mechanism for platinum and palladium is set to be put in place in early December. The changes to the fixing process for precious metals have arisen from concerns about price manipulation and collusion among market participants under the old system.
Gold miners are feeling the pressure of lower metal prices, as more and more mining companies are having to write-off their lower-grade gold reserves and unfinished exploration projects before recalculating whether or not these ventures are profitable at the current price point. There is some speculation that a gold price below $1,000 would push just about every gold mine below its break-even level, at which point any rational business would have to stop production and reassess the operation.
Elsewhere in the world of resource mining, China's largest gold mining company, China National Gold, is among the buyers who are interested in acquiring three Chinese gold mines owned by El Dorado gold. Although China has expanded its mining interests to other nations abroad, such as South Africa, there are still mines in mainland China that are run by foreign corporations. The addition of the three El Dorado mines would represent an increase of about 300,000 oz of annual gold production, or an additional 9.3 tonnes. The estimated price of the acquisition has been estimated as high as $1.5 billion.
Geopolitical News Affecting Gold
Heavy fighting has resumed in Ukraine after Kiev claimed that "dozens" of Russian tanks crossed the country's eastern border, along with trucks full of troops and armaments. While Ukrainian authorities are charging this as a clear sign of Russian aggression, the situation remains murky as both sides have accused the other of violating the ceasefire that was agreed upon about two months ago. Tensions have been rising between the two sides in response to the West's characterization of elections held in the rebel-controlled regions of Donetsk and Luhansk this past weekend as illegitimate.
The fresh tensions in Ukraine are coupled with Russia's floundering economy. The ruble is suffering its worst week of losses in five years, reaching all-time lows as Russian stocks continue to tumble. The ruble is down 29% on the year, prompting rumors that an emergency meeting of the Russian Central Bank may be in order. The central bank has recently changed in Forex intervention rules, limiting itself to spending only $350 million per day to support the ruble. The bank had recently been selling off its reserves in order to keep the Russian currency afloat, but the drain on foreign reserves is pulling down the country's credit rating.
Riots are gripping the Belgian capital city of Brussels, as protest marches have erupted into violent clashes between demonstrators and police. The uprising stems from the election of a new conservative government in Belgium last month. The new ruling party is embracing the European Union's call for austerity measures, promising to raise the retirement age, cancel wage increases that would keep pace with the cost of living, and cut social security benefits and other forms of welfare. The marches began peacefully, as over 100,000 protesters marched the streets of Brussels without incident until authorities began to use tear gas and water cannons to disperse the crowds. The sight of burning cars and police barricades speaks to the tension between the supporters of the EU's stimulus program administered through the ECB, and proponents of austerity as a solution to the Eurozone's problems of deflation and mounting debt.
Janet Yellen is speaking at Banque de France meeting in Paris this morning at 10:15. She is expected to give a clearer view of the Fed's plans for raising rates. Looking to Sunday this weekend, the vote for Catalan independence from Spain is set to take place, although clashes between the Catalonians and thousands of Spanish national police are threatening to derail the vote. Spain has reiterated it will not recognize the results of such a referendum.
Remember that the U.S. bond markets will be closed on Tuesday on observance of the Veteran's Day holiday, but stocks and futures exchanges will remain open. Don't forget to show your support for our troops!